Stadium Capital Management LLC, along with its affiliates, has significantly increased its stake in Sleep Number Corp (NASDAQ:SNBR) with recent purchases totaling approximately $2.57 million. The transactions, executed between October 31 and November 4, involved the acquisition of shares at prices ranging from $12.9303 to $13.9648.
The purchases were made by Stadium Capital Partners, L.P., and Stadium Special Opportunity I, L.P., both of which are linked to Stadium Capital Management. The acquisitions have raised the total shares owned by these entities, with Stadium Capital Partners now holding over 2 million shares directly.
This move underscores Stadium Capital's continued interest in Sleep Number, a company known for its innovative sleep solutions, including adjustable and smart beds. The reporting entities, including Stadium Capital Management GP, L.P., and Alexander M. Seaver, a manager at Stadium Capital, have been involved in the transactions as they seek to bolster their holdings in the Minneapolis-based company.
Investors and market watchers will likely view these transactions as a vote of confidence in Sleep Number's potential for growth and value, given the substantial investment made by Stadium Capital Management and its affiliates.
In other recent news, Sleep Number Corporation reported a 10% year-over-year decrease in net sales for the third quarter of 2024, totaling $427 million. Despite this, the company maintained a steady adjusted EBITDA of $28 million. CEO Shelly Ibach also announced her forthcoming retirement, scheduled to take place no later than the 2025 annual shareholders meeting.
In the face of these developments, Sleep Number has seen an improved gross margin of 60.8%, and a reduction in operating expenses, with a target to reduce full-year expenses by about $75 million. The company has also introduced the ClimateCool smart bed to its product lineup, which is a part of their ongoing efforts to maintain financial resilience and cash flow generation amidst a challenging retail environment.
The full-year adjusted EBITDA guidance was revised to $115 million to $125 million, down from the previous $125 million to $145 million. Lastly, Sleep Number is focusing on financial resilience and improving cash flow, with Q4's adjusted EBITDA projected to exceed $25 million, signaling a potential recovery.
InvestingPro Insights
Stadium Capital Management's recent $2.57 million investment in Sleep Number Corp (NASDAQ:SNBR) comes at a time when the company faces both challenges and opportunities. According to InvestingPro data, Sleep Number's market capitalization stands at $292.17 million, reflecting the current valuation of the company in which Stadium Capital has increased its stake.
Despite the vote of confidence from Stadium Capital, Sleep Number's financial metrics paint a complex picture. The company boasts impressive gross profit margins, with InvestingPro data showing a gross profit margin of 58.8% for the last twelve months as of Q3 2023. This strength in margins could be a factor in Stadium Capital's investment decision, suggesting potential for profitability improvements.
However, Sleep Number is currently navigating through headwinds. An InvestingPro Tip indicates that analysts anticipate a sales decline in the current year, which aligns with the reported revenue growth of -11.28% over the last twelve months. Additionally, the company is not profitable over the last twelve months, with a negative P/E ratio of -16.66, adjusted for the last twelve months as of Q3 2023.
The stock's performance has been volatile, with InvestingPro data showing a one-month price total return of -28.22% as of the latest available data. This volatility is further emphasized by another InvestingPro Tip, which notes that the stock generally trades with high price volatility.
For investors considering following Stadium Capital's lead, it's worth noting that InvestingPro offers 11 additional tips for Sleep Number Corp, providing a more comprehensive analysis of the company's financial health and market position. These insights could be valuable for understanding the full context of Stadium Capital's investment strategy.
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